GCC Market Analytics

Dubai's Default Risk: Better than Portugal, Worse than Egypt

2011-03-15T13:23:00.001+04:00

Sheikh Mohammed believes that Dubai has recovered from the impact of the global economic crisis. However, it seems that finincial markets aren't as convinced.

The table below (via the Think Big blog) ranks sovereign credit deafult swap (CDS) prices. CDS's are like insurance policies against a default with higher CDS prices reflecting a higher chance of default.

As you can see, Dubai has a high risk of default ranking. The fact that Dubai sits between Portugal and Egypt in the rankings says it all.

Of course, markets have been known to be wrong when it comes to pricing risk. On the other hand leaders and politicians are almost never correct when it comes to making economic predictions (Sheikh Mohammed certainly didn't forsee the meltdown that Dubai's economy experienced over the past two or three years).

The problem for Dubai is that, just like Greece and Ireland, it now has a mountain of debt to service and repay. That debt is going to be a serious drag on the economy going forward. And judging by the CDS price some investors are predicting that Dubai, in the end, won't be able to pay those debts back in full.

Enjoy.

Weekly Market Analysis (Week 11)

2011-03-12T11:40:00.000+04:00

The weekly market analysis pages have been updated for trading week 11 (March 12th - March 18th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

March Seasonality

2011-03-06T18:10:00.000+04:00

Historically, March has been good month for GCC stock markets. However, that was also the case for February but last month definitely didn't conform to historical tendencies.

The chart below shows the average daily percentage change for each GCC market during each calendar month.

As you can see, the average daily percentage change during March has been positive for all markets except Bahrain. However, with the continuing political and social unrest in the region I wouldn't place too much weight in seasonal effects at the moment.

Enjoy.

P.S. It should be noted that we're dealing with a very small data set for this analysis. My data only goes back as far as 2004 for GCC equity markets so there have only been seven prior instances of each calendar month. It's hard to draw any concrete conclusions from such a small data set.

Weekly Market Analysis (Week 10)

2011-03-06T12:55:00.000+04:00

The weekly market analysis pages have been updated for trading week 10 (March 5th - March 11th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

GGC Stock Markets Go Oversold

2011-03-03T11:57:00.000+04:00

Below are the long-term price and RSI charts for the GCC stock indexes. With the recent price fall it's not surprising that many markets are now in oversold territory.

In a follow-up post I'll take a look at what these oversold levels mean for the markets going forward.

Enjoy.

GCC Index Performance: February

2011-03-01T17:32:00.001+04:00

Given the political situation in the MENA region at the moment it's not surprising that February was a bad month for GCC stock markets.

The Muscat 30 Index was the worst performer, dropping by 10.18% with the Qatar market not far behind with a 9.29% fall. Dubai, Saudi and Kuwait all fell by over 5%.

Despite Bahrain's problems the country's stock index dropped by just 1.25% in February. However, but for the complete lack of liquidity in the Bahrain market at the moment (many stocks did not trade at all during February) I think the index falls would be a lot, lot worse.

Abu Dhabi was the best performer, managing to eek out a small gain (0.08%) on the month.

On a year-to-date basis the picture doesn't get any better. All stock indexes are down for the year with the Dubai market having already lost over 13% in 2011.

Enjoy.

Dubai Stocks Make New Bear Market Low

2011-03-01T10:35:00.000+04:00

Bad day for the Dubai market yesterday. The DFM General Index was down 3.83% for the day, finished down 8% for the month and made a new barket market low.

The Index closed at 1410.70. That's the lowest level since the previous bear market low was made in Februrary 2009. The first time the Index was trading at the current level was.........wait for it.........back in June 2004!

The good news is that the DFM General Index can only go down another 1,410 points before it hits the zero level. I'm fairly confident that it can't go any lower than that.

Enjoy.

Weekly Market Analysis (Week 9)

2011-02-26T17:58:00.000+04:00

***** Apologies for the hiatus in posting. I've been with sidelined with a particularly nasty and persistent cold/flu bug for the past couple of weeks. Getting back to normal now though so you can expect regular blog activity. *****

The weekly market analysis pages have been updated for trading week 9 (February 26th - March 4th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Divergent Stock Market Performance

2011-02-14T10:51:00.001+04:00

US equity markets continue to grind higher. The S&P 500 Index is currently over 23% higher than it was this time last year and new recovery highs seem to be established almost every other trading session.

But the recent strength in US stocks has not been matched by other markets. The charts below show the performance of several major indices over the past year. As you can see, the S&P 500 Index is trading at a yearly high . All other markets, however, are trading well below their highest level over the past year.

I haven't looked into what this divergence in performance may for future stock price direction. But it's interesting, isn't it?

Enjoy.

Weekly Market Analysis (Week 7)

2011-02-12T14:55:00.000+04:00

The weekly market analysis pages have been updated for trading week 7 (February 12th - February 18th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Weekly Market Analysis (Week 6)

2011-02-04T13:25:00.000+04:00

The weekly market analysis pages have been updated for trading week 6 (February 5th - February 11th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Qatar Market Retreats From Overbought Levels

2011-02-03T12:11:00.000+04:00

In a previous post I looked at how the Qatar market was in overbought territory based upon the 20-day Relative Strength Index (RSI).

Well, since that post the Qatar market has fallen by about 5%, causing the RSI to retreat from those overbought levels.

In the previous post the RSI level for the QE Index was at 80. The updated chart below shows that the RSI has now fallen to 40. That's the biggest RSI decline since the start of the market rally back in the summer of 2010.

In the previous post I also looked at the Qatar stocks with the highest RSI levels. Below are the updated charts for those stocks. Like the QE Index, they have all retreated from their overbought levels - but some more than others.

Enjoy.

January Large Cap Monitor

2011-02-03T09:52:00.000+04:00

Banks were amongst the big large cap winners in January. Qatar National Bank rose 8.65%, Al Ahli United Bank +7.04% and Emirates NBD +5.43%.

The biggest fallers were Emaar Properties (-14.08%), First Gulf Bank (-10.68%) and Saudi Telecom (-8.69%).

Enjoy.

[ Click to enlarge ]

February Seasonality

2011-02-03T08:34:00.000+04:00

How have GCC stock markets performed during previous February's?

The chart below shows the average daily percentage change for each GCC market during each calendar month.

As you can see, February has tended to be a good month for GCC stocks with all markets showing a positive average daily return. In fact, from a historical perspective, February through April has been the strongest part of the year for GCC markets.

Here's hoping this February confirms to historical tendencies.

GCC Index Performance: January

2011-02-01T10:33:00.000+04:00

Everything went a bit wrong in the final few days of January, brought about by the Egypt situation, of course.

The Dubai and Abu Dhabi markets are once again the worst performers with the DFM General Index losing 5.90% in January and the ADX losing 4.89%. Muscat, Bahrain, and Qatar all managed to stay positive for the month, despite suffering late Egypt related falls.

Enjoy.

Fox News Covers the Egypt Crisis

2011-01-31T19:59:00.000+04:00

This one speaks for itself:

What do you expect, it's Fox News.

Enjoy.

UAE Stock Monitor

2011-01-30T10:00:00.001+04:00

The pre-opening market activity for Dubai and Abu Dhabi stocks is indicating a sizable drop this morning.

Regional markets are going to be dominated by what's happening in Egypt. At the moment the focus is on when and how the current president is "relieved of his duties." But assuming Mubarak does go the focus will then turn to who and what type of government replaces him. And the answer to that is none to clear at this point in time.

This uncertainty and the potential for more dominoes to fall is going to put pressure on GCC markets and probably global markets as well.

That said, below are some performance stats for UAE stocks based on Thursday's close. If stocks do end up being whacked today, however, the picture could change substantially.

Enjoy.

Key:

Close Price: weekly stock closing price
Weekly Change: prior week's percentage stock price change
Price > 50-Day Moving Average: is the Close Price greater than previous 50-day average price
Price > 200-Day Moving Average: is the Close Price greater than previous 200-day average price
Volume > 20-Day Average: is the current volume greater than the previous 20 days average
Current Price versus 20-Day Range: where is the current price in relation to the previous 20 days

[ Click to enlarge ]

Unrest in Egypt Spooks Saudi Market

2011-01-29T19:49:00.000+04:00

Clearly, the situation in Egypt has made investors in Saudi very nervous. The Tadawul Index dropped 6.43% today with volume spiking to levels not seen in well over six months.

With such a decisive fall you'd expect the other GCC markets to follow Saudi's lead when they open tomorrow.

Unsurprisingly, the countries in the eye of the storm have seen their stock prices sell-off considerably. The Egypt 30 Index fell by more than 10% on Thursday alone.

Also, oil futures rose by nearly 5% on Friday. That's the biggest one day rise since September 2009.

In short, the financial markets are nervous about the situation in Middle East and the possibility of further contagion in the region. Things are moving quickly and no one is sure what will happen next. And as everyone is fond of saying, markets hate uncertainty.

Enjoy.

Saudi Stock Monitor

2011-01-29T11:59:00.134+04:00

The tables below show the following for each Saudi stock:

Close Price: weekly stock closing price
Weekly Change: prior week's percentage stock price change
Price > 50-Day Moving Average: is the Close Price greater than previous 50-day average price
Price > 200-Day Moving Average: is the Close Price greater than previous 200-day average price
Volume > 20-Day Average: is the current volume greater than the previous 20 days average
Current Price versus 20-Day Range: where is the current price in relation to the previous 20 days

[ Click to enlarge ]

Enjoy.

Aldar on the Edge (Not Any More)

2011-01-28T14:37:00.000+04:00

At the beginning of the week I noted how the stock price of Aldar Properties was teetering on the edge, at the 2 dihram level.

Well, it's not any more. The 2 dihram level offered no support and stock fell to a new lifetime low of 1.81 by Thursday's close. Aldar finished down 11% for the week and is now down 20% since the start of the year (and an eye watering 86% from its 2008 all time high).

Enjoy.

Weekly Market Analysis (Week 5)

2011-01-28T11:39:00.000+04:00

The weekly market analysis pages have been updated for trading week 5 (January 29th - February 3rd). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Aldar on the Edge

2011-01-23T11:54:00.000+04:00

How the mighty have fallen. Aldar Properties joins a steadily increasing list of UAE companies that have required financial assistance.

But Aldar is significant in that it is the first big Abu Dhabi company to get itself into trouble (from my knowledge, anyway). We're used to this kind of thing with Dubai companies but Aldar's situation shows that problems exist further afield.

One analyst report I read claimed that Aldar wasn't the subject of a bailout but was just raising funds, like any other company might do. So, Aldar's a bit like Facebook then. Just raising a bit of capital

Well, bailout or not, Aldar's stock price is teetering on the edge. As the chart below shows the current stock price is sitting at the 2 dihrams level.

The two previous times Aldar's share price has visited this level (late 2008 and mid 2010) the stock has rallied. And what about this time? Under the circumstances you would think it's probably going to be a case of third time unlucky.

What Aldar does could be important to the wider Dubai and Abu Dhabi markets. Aldar is a heavily traded stock and if breaks below the 2 dihram level that could impact sentiment for other stocks.

Time to keep an eye on Aldar, even if don't own it right now.

Enjoy.

Weekly Market Analysis (Week 4)

2011-01-21T12:46:00.001+04:00

The weekly market analysis pages have been updated for trading week 4 (January 22nd - January 27th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Qatar Market in Overbought Territory

2011-01-15T13:39:00.000+04:00

The Qatar market continues to advance higher. The QE Index is up 9% since the 2022 World Cup announcement on December 2nd. Clearly there's a lot of optimism surrounding Qatar at the moment.

However, the Relative Strength Index (RSI) is signaling that the Qatar market is in overbought territory. For those not familiar with the RSI see here. In short, the RSI is a momentum measure that oscillates between zero and 100. When the RSI is below 30 this signals that the stock or index is oversold. When the RSI is above 70 this signals an overbought stock or index.

That chart below shows the QE Index (top chart) along with the 14-day RSI indicator (bottom chart). The green shaded area represents oversold RSI levels and the red shaded area overbought levels.

As you can see, the RSI for the QE Index is currently above 80, well into overbought territory. Does this mean a big sell-off is imminent? Not necessarily. When a stock or market does get this overbought it is certainly vulnerable to a sizable sell-off. For example, the first two overbought occurrences highlighted on the chart above resulted +10% market falls.

But more recent overbought levels have just been met with a pause or mild pullback prices. So, on its own, a high RSI level isn't a reason to sell (especially when the weekly market analysis of the Qatar market is so bullish). However, entering the market at such overbought levels probably isn't a good idea either and certainly wouldn't provide a good risk-to-reward trade.

At the very least when the RSI level for a stock or index is above 70 this should be taken as a "proceed with caution" signal. With that in mind below are the Qatar stocks with the highest current RSI levels.

Enjoy.

Weekly Market Analysis (Week 3)

2011-01-14T09:57:00.001+04:00

The weekly market analysis pages have been updated for trading week 3 (January 14th - January 20th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Wall Street vs Main Street

2011-01-12T10:15:00.001+04:00

Do you keep hearing about the disconnect between Wall Street and Main Street? Well, the chart below does a nice job of quantifying this disconnect.

The blue line is the S&P 500 Index (Wall Street) and the green line is the Consumer Confidence Present Situations Index (Main Street) which measures overall consumer sentiments toward the present economic situation.

Over the past 20 years the two time series have displayed a high degree of co-movement. However, since March 2009 an interesting and unusual divergence has occurred. The S&P 500 Index has rallied by over 50% since the March 2009 bottom whereas consumer confidence has remained at historic low levels.

Why the disconnect? Well, I think stock markets and asset prices in general have been buoyed by the Fed's quantitative easing activities (see this previous post on the relationship between the Fed's Treasury purchasing program and the S&P 500 Index). However, Main Street continues to experience high unemployment and a depressed housing market.

But whatever the reasons for the disconnect the more important question is what comes next? If the S&P 500 Index continues to rise can we expect a rebound in consumer confidence? If consumer confidence remains low or falls further will this drag the S&P 500 Index down? Or is the relationship between stocks and consumer sentiment broken?

My hunch it that the current disconnect between Wall Street and Main Street will continue. I'm not expecting some stellar rebound in consumer confidence or a market collapse. But in the longer run something will have to give.

Enjoy.

GCC Market Breadth Performance Review

2011-01-11T20:50:00.000+04:00

This is the second in a series of posts evaluating the performance of the studies presented in the weekly market analysis report (see first post here).

This post will look at the performance of the market breadth analysis. Market breadth is measured using the 20-day advance/decline indicator. When the advance/decline indicator is greater than zero this tells us that more stocks have risen in price than fallen. When the indicator is less than zero more stocks have declined in value. (See the following post for more details on this indicator and how it is calculated: Part I, Part II and Part III)

On the charts below I've highlighted the market breadth for each GCC Index from August to December 2010. The green shaded areas denote periods when market breadth was positive and red shaded areas are the negative breadth periods.

I think it's fair to say that the charts above show that the market breadth analysis has done a pretty good job of identifying bullish and bearish periods.
Here are the actual performance figures:

Under positive market breadth (first column) GCC markets have tended to perform strongly, much more so than when breadth was negative (second column).

For example, under positive market breadth the DFM General Index returned +21.79% whilst the Index lost -9.40% during negative breadth periods.

The performance during positive market breadth periods beat total index returns (third column) for 5 out of the 7 GCC markets.

In conclusion, as with the trend analysis I reviewed in the last post, market breadth has performed very well over the past 5 months. For all GCC markets positive breadth has been associated with rising index levels whilst negative breadth has been associated with falling for flat index levels.

Enjoy.

Looking Behind the US Unemployment Figures

2011-01-10T09:31:00.000+04:00

As you've probably heard by now the unemployment rate in the US dropped from 9.8% to 9.4% in December. That's the biggest single month drop in twelve years and lowest unemployment level since May 2009. President Obama was quick to highlight this figure to the US public as proof that the economy was recovering. "The trend is clear" he said.

Well, the US economy may well be improving but trends are rarely so clear. The problem is that headline figures, such as the unemployment rate, almost never tell the whole story.

For example, it's true that the US labour force did grow by 103,000 jobs in December. However, industry analysts were expecting a rise of 150,000 jobs and for the unemployment rate to drop 0.1% to 9.7%. So how did the US economy add fewer jobs than expected but the unemployment rate fall so dramatically?

Time for a chart courtesy of the Calculated Risk blog:

The red line shows the headline unemployment rate. As you can see, the rate has begun to fall from its recent highs. However, the other two lines are revealing. The blue line is the participation rate. This is the percentage of working age persons that are in the labour force. The black line is the ratio of ratio of employment to the US population.

Both the participation rate and employment to population ratio are at levels not seen in over 25 years. In December alone 260,000 people dropped out of the labour force. These are the long-term unemployed who have essentially given up looking for work. These people are no longer included in the unemployment figures.

And when so many people leave the labour force the headline unemployment figure gets skewed. In this instance the fall in unemployed was exaggerated due to the large decline in the participation rate.

In this light the unemployment figure don't seem so good. And consider this. The US economy must add about 125,000 jobs each month just to keep up with normal population growth.

Or how about this: it will take about 175,000 new jobs to be created each month over the next five years just to make up for the ones that have been lost during this recession.

We can all be glad that the US economy is now growing and adding jobs. But if there's one thing that is clear it's that the pace of recovery is very sluggish. That's not the upbeat media soundbite that Obama is looking for, but it is the truth.

Enjoy.

GCC Trend Analysis Performance Review

2011-01-08T17:52:00.001+04:00

I've been putting out the weekly market analysis report (in some form or another) for a few months now so I thought it was time to take a periodic look at how each study has performed.

This post will look at the trend analysis performance. As quick recap the trend analysis uses three dual moving average s to determine the current short, medium and long-term trends. For each GCC market the current trend conditions are compared to previous instances. If the market has tended to increase in value during previous instances then the predicted outlook is Bullish. If the market has tended to fall the predicted outlook is Bearish whilst if there is no directional price tendency the outlook is Neutral.

On the charts below I've highlighted the trend outlooks for each GCC Index from August to December 2010. The green shaded areas denote periods when the trend analysis was forecasting a Bullish outlook. The red shaded areas denote Bearish outlook periods and the pale yellow areas are for Neutral outlooks.

Just from eyeballing the charts you can seen that the trend analysis has done a reasonable job of identifying rising and falling market moves.

For the number lovers the table below shows the actual performance figures:

The first column shows the percentage return of each GCC index during periods when the predicted outlook was Bullish. The second column is the percentage return during periods when the predicted outlook was either Neutral or Bearish. The final column shows the total percentage return for each index from August to December 2010.

The most important takeaway from these figures is that the performance of each market during Bullish outlook periods was significantly better than the performance during the combined Bearish and Neutral periods. This confirms that the trend analysis has managed to predict rising and falling market moves for the GCC markets. Additionally, the performance during Bullish outlook periods beat total index returns for 4 out of the 7 GCC markets. Not bad, especially over such a small period of time (Aug-Dec 2010).

In conclusion, the trend analysis looks to be working well and is successfully predicting bullish and bearish market action.

Enjoy.

UPDATE 2: Is the Saudi Stock Market Winding Up for a Big Move?

2011-01-07T10:42:00.001+04:00

In previous posts (here and here) I've been looking at the price action of the Saudi Tadawul Index.

This is just a quick update to note that since the breakout the Index has continued to steadily rise value.

The Saudi Index remains in its strongest trend conditions with the short, medium and long-term trends all continuing to point upwards.

One potential dark cloud is market breadth. Although breadth remains positive the number of stocks participating in the market rise has fallen. This is something worth keeping an eye on. If breadth continues to deteriorate then it may signal a pause in the current market advance.

Enjoy.

Weekly Market Analysis (Week 2)

2011-01-06T23:30:00.002+04:00

The weekly market analysis pages have been updated for trading week 2 (January 8th - January 13th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Saudi Stokcs: 2010 Winners & Losers

2011-01-06T09:29:00.000+04:00

Saudi was the second best performing market after Qatar in 2010. The Tadawul Index rose by 8%,

The table below shows the 2010 percentage returns for Saudi stocks.

Enjoy.

Qatar Stocks: 2010 Winners & Losers

2011-01-02T21:46:00.000+04:00

Qatar was where the action was in 2010 with the market rising by 25%.

The table below (click to enlarge) shows the 2010 percentage returns for Qatar stocks.

[ Click to Enlarge ]

Enjoy.

January Seasonality

2011-01-02T21:00:00.000+04:00

How have GCC stock markets performed during previous January's?

The chart below shows the average daily percentage change for each GCC market during each calendar month.

As you can see, for most GCC markets January has been slightly bearish in previous years.

[ Click to enlarge ]

Enjoy.

Is Improving Market Breadth Signalling New Year Advances for Dubai and Abu Dhabi Stocks?

2011-01-01T13:06:00.001+04:00

The August to October stock rally in the UAE saw the DFM General Index rise +22% and the ADX Index rise by +15%.

Since the end of October, however, both markets have given back some of those gains with the Dubai market 10% off its highs and the Abu Dhabi market off 5%.

The question now is does this current decline represent a mere pull-back before the market continues to move upwards or is it the beginning of a larger downwards move, the kind of which traders and investors in the UAE markets have become so used too over the past several years?

Well, trying to pick significant stock market bottoms can be a perilous endeavour. Especially for the UAE or other GCC markets whose price action is highly persistent (when prices start moving in a certain direction, up or down, they have a strong tendency to continue moving in that direction).

That said, it's a good idea to at least be on the lookout for potential market turning points. In this week's market analysis the trend outlook for the UAE markets is still mildly bearish. However, the breadth measures for the Dubai and Abu Dhabi markets (as measured by the 20-day advance/decline indicator) have both turned positive this week:

Now, any sizable market decline next week will see market breadth turn negative again. But if UAE stocks manage to hold up this coming week and breadth remains positive it could signify a larger upwards move is in the offing.

For a refresher on market breadth and how UAE stocks have performed under positive and negative breadth please see these previous posts: Market Breadth I, Market Breadth II & Market Breadth III.

Enjoy.

Weekly Market Analysis (Week 1)

2010-12-31T22:50:00.001+04:00

The weekly market analysis pages have been updated for trading week 1 (January 2nd - January 6th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

UAE Stocks: 2010 Winners & Losers

2010-12-31T19:28:00.001+04:00

The average stock in the UAE declined by about 9% in 2010 with falling stocks outnumbering rising stocks by two to one.

The table below (click to enlarge) shows the 2010 percentage returns for UAE stocks.

Enjoy.

And The Winner Is......

2010-12-30T17:59:00.000+04:00

Today was the final trading session on the year for GCC markets. The Qatar market was the big winner this year, rising by almost 25%. Saudi and Muscat managed to eek out modest gains whilst Kuwait, Abu Dhabi and Bahrain finished slightly in the red for the year.

The big under-performer in 2010 was the Dubai market which fell 9.60%.

[ Click to enlarge ]

Enjoy.

US Stock Sentiment is Extremely Bullish

2010-12-28T08:12:00.000+04:00

Here's an interesting chart I came across on the Bespoke Investment Group blog. It shows the combined bullish sentiment measures of the American Association of Individual Investors and the Investors Intelligence surveys.

The current bullish sentiment towards stocks in the US has only been higher on eight occasions since 1987.

In order to see how this relates to the stock market below I've overlayed the S&P 500 Index on the same chart.

As you can see, some previous extreme bullish sentiment levels have corresponded with significant market highs (1987, 2000, 2007). However, other extreme readings have merely been followed by a temporary pause or mild pull pack in stock prices.

So what can we expect to follow this current extreme in bullish sentiment? Well, any significant decline in the market will have to overcome some serious headwinds. We're in the midst of the Santa Claus rally, then there's the combined January effect and 3rd year of the Presidential cycle coming up. And let's not forget the Fed's continuing POMO activities which appear to be bullish for stock prices.

Of course, on the negative side there's the ongoing debt crisis in Europe. That alone has the potential to derail the stock market. And as I've pointed out in a previous post, the fact that bond yields are rising pretty much across the board could be an early warning sign of trouble ahead.

My best guess would be that we're in for a temporary pause in the US stock market advance over the next few months. That will enable the current extreme bullish sentiment to be worked off. But in these unusual economic times I wouldn't rule out the market's potentail to deal up a big surprise either.

Enjoy.

Weekly Market Analysis (Week 52)

2010-12-25T20:09:00.001+04:00

The weekly market analysis pages have been updated for trading week 52 (December 25th - December 30th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

US Unemployment: A Reason to be Optimistic

2010-12-22T13:03:00.000+04:00

Any improvement in the global economic situation will almost certainly correspond with an improvement in the economic conditions in the US. The US is still the biggest economy in the world and the eyes of all other countries, including the Gulf region, will be watching for signs of a turnaround in the American economy.

And there's little chance of any meaningful or sustained recovery in the US without a significant improvement in two areas: employment and housing.

Well, I came across some interesting charts on Don Fishback's blog that hint at better times ahead for US employment.

The first chart below shows the US employment rate (blue line) along with NFIB "Poor Sales" (red line). As you can see the two series are highly correlated. Members of the NFIB are made up of small businesses. In the past, when there has been a high number of NFIB members that have rated their sales as "poor" this has tended to correspond with high unemployment periods. Conversely, low unemployment periods have tended to correspond with a low number of NFIB members that rated their sales as poor.

In short, unemployment in the US is closely correlated to the level of small business sales. Makes sense.

At present the level of unemployment and number of small businesses rating their sales as "poor" are both at historically high levels. However, recently the NFIB "Poor Sales" level has begun to fall from the highs set about a year ago.

The next chart below shows the NFIB Optimism Index which is a measure of small business sentiment in the US. Although still low in a historical sense the level of small business optimism has risen significantly since the 2009 bottom and has just posted its fourth consecutive monthly gain.

What do the two charts above mean for US unemployment: Here Don Fishback:

Here’s the bottom line. If small businesses are optimistic for a reason … if sales really are starting to pick up and become less poor … then we might actually see improvement in the unemployment rate.

And if the unemployment rate does fall that's a big win for the US economy and the rest of the world.

Enjoy.

UPDATE: Is the Saudi Stock Market Winding Up for a Big Move?

2010-12-19T09:59:00.001+04:00

In a previous post last week I noted how the Saudi Tadawul Index had been consolidating over the past six months and the potential for a big price move ahead. Well, as you can see from the updated chart below, the Index has now risen above the upper trading range.

Will this lead to a big upside price movement? Or will this turn out to be a "fake" breakout with prices quickly reversing lower and back into the consolidation range?

Well, from the perspective of this week's Saudi market analysis the outlook is positive for the next few trading sessions. Currently, the Tadawul Index is experiencing the strongest trend conditions with the short, medium and long-term trends all pointing upwards.

Saudi market breadth has also turned positive which, in the past, has corresponded with rising Index levels.

So things look good for the short-term. For the longer-term it's a case of wait and see.

Enjoy.

Don't Fight the Fed (Especially When They're Throwing a $600 Billion Party!)

2010-12-18T23:25:00.001+04:00

Below is an interesting chart I came across on the Quantifiable Edges blog. It shows the S&P 500 Index (green line) along with the 20-day running total of the Fed's POMO activity (red line).

[ Click to enlarge ]

What's POMO? Quantifiable Edges explains:

For those unaware POMO stands for Permanent Open Market Operations and it is how the Fed goes into the open market to buy (or sell) treasury securities. The net effect of this buying is an influx of cash into the system. It appears a portion of that cash makes its way through the banking system and into the stock market. It also appears that the net effect of all this Fed buying is a positive influence on the stock market. Conversely, when the Fed sells securities in the open market then it is pulling money from the system. This appears to have a possible negative influence on the stock market.

As the chart shows, the current level of treasury purchases by the Fed is on a par with the purchases made in response to the market meltdown in 2008. The high levels of POMO activity during 2008 and 2009 was the result of the first round of quantitative easing and corresponded with an explosive turnaround in the stock market.

We're now in the midst of the second round of quantitative easing (QE2). QE2 will amount to $600 billion and is scheduled to last until June next year. As with QE1, QE2 has so far been positive for the US stock market and with another six months of Fed stimulus yet to go that could carry over well into 2011.

This looks like a case of "don't fight the Fed." Of course, there are many reasons to be bearish on stocks right now (high valuations, European debt crisis, high unemployment, little sign of a turnaround in the US housing market, etc) but if the Fed is intent on throwing a party it probably isn't a good idea to trade against them.

Enjoy.

P.S. One potential problem to a continued stock market rally are rising yields. The primary aim of QE2 is to keep long term interest rates at low levels. However, as noted in a previous post, yields on 10 year US treasuries have risen significantly over the past couple of months, despite the Fed's purchasing activity. Has the bond market realised something that the stock market hasn't?

Weekly Market Analysis (Week 51)

2010-12-18T13:32:00.000+04:00

The weekly market analysis pages have been updated for trading week 51 (December 19th - December 23rd). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Keep an Eye on the Bond Markets

2010-12-18T10:52:00.004+04:00

Despite the S&P 500 Index making new recovery highs the real action at the moment is in the bond market.

Bonds tend to get less attention than stocks even though the global bond market is $82 trillion versus about $45 trillion for global equity markets. Also, the bond market is arguably more influential on the stock market than the other way around. Which, if you're bullish about the future prospects of stocks, makes the current goings on in the bond market a bit worrying.

You've probably already heard about the European debt crisis. Here's what it looks like from the perspective of the bond market:

The charts above show the 10 year bond yields for Spain, Portugal, Ireland and Greece. The so called PIGS. Think of the yield as the interest these countries must pay in order to borrow money.

As you can see, yields have risen sharply for these countries. Greece and Ireland have already received financial aid but this has done little to bring down borrowing rates for those countries. In fact, the current yield on Greek bonds is now back to levels seen just before the country's bailout in the spring.

Despite the bailouts the bond market is essentially predicting the both Greece and Ireland will eventually have to restructure their debt obligations (a.k.a. default). The same goes for Spain and Portugal which, as yet, haven't required financial assistance.

Portugal could be bailed out in the manner of Greece and Ireland but Spain is a problem. The Spanish economy is twice as big as the Greece, Ireland and Portugal combined. Which poses the serious question: is Spain too big to bail?

The whole point of sovereign bailouts was to stop the spread of the debt crisis to other countries. Has that worked?

Well, it doesn't look like it. As the charts above show, the yields on Italian, Belgium and even French and German debt have risen sharply over the past couple of months. Which makes sense because as each country is bailed out the remaining Euro zone countries take on their debts. So, rising French and German bond yields are simply a reflection that those countries have taken on the debt obligations of Greece and Ireland as well and Spain and Portugal in the not too distant future.

The problem is not just contained within Europe either. Check out the recent jump in US 10 year treasuries:

And this is despite the Fed's current $600 billion spending spree, the primary aim of which was to keep yields at their previously historic low levels. That jump in yields doesn't translate into good news for the US housing market.

Conclusion

Bond market yields are pricing in something nasty. Of course, that could turn out to be wrong. But the bond market hasn't been wrong so far and if they're right about the future stock markets will eventually have to play catch up. My advice: keep and eye on bond markets. That's where the front line of the ongoing financial crisis is at the moment. Here are the relevant links to the charts above:

Greece - Ireland - Spain - Portugal - Italy - Belgium - France - German - USA - UK

Enjoy.

GCC Stock Index Volatility

2010-12-15T09:43:00.000+04:00

The charts below show the price performance of each GCC market index along with the corresponding 20-day volatility (blue shaded area) and the average 20-day volatility (dashed lined).

For those not familiar with volatility check out Google or see this: Volatility

As you can see, for all GCC equity markets the current 20-day volatility is well below the historical averages. In fact, for several markets the current volatility levels as low as they've been for some time.

Which begs the question: are we due for an increase in volatility in 2011? And if volatility does increase will it be accompanied by an upward or downwards move in stock markets?

In upcoming posts I'll be taking a closer look at volatility of GCC equity markets and whether it can tell us anything revealing about future price action.

Enjoy.

Death From Opinions

2010-12-14T22:44:00.001+04:00

I came across the chart below and thought it amusing. I think it's a case of: it's funny becasue it's true.

( via No Brainer Trades )

Enjoy.

Is the Saudi Stock Market Winding Up for a Big Move?

2010-12-11T10:01:00.001+04:00

Over the past six or seven months the Saudi Tadawul Index has been trading in an ever narrowing range (see chart below). This type of price action is what's called a consolidation pattern.

A consolidation pattern can be likened to a tightly coiled spring. When prices eventually breakout from a consolidation pattern they tend to make extended and often explosive directional moves.

As you can see, index levels for the Saudi market have been coiling for several months now. So is a price breakout imminent?

When evaluating the validity of a consolidation pattern traders look for declining volume as prices contract. As the chart below shows, this is exactly what has happened in the Saudi market during the period prices have been consolidating.

Of course, even if we expect a breakout is just around the corner this doesn't tell us if prices are going to breakout to the upside or downside. Currently, prices are at the top of their trading range so there's is an immediate possibility of an upside breakout. The latest weekly market analysis for Saudi is quite bullish for the week ahead which also supports an upside price move.

However, as has happened continually over the past several months prices could easily reverse and quickly move to the lower end of the trading range. In doing so that would raise the likelihood of a downside breakout. Either way, I'll be keeping a close eye on the Saudi market over the coming days and weeks to see what unfolds. Expect updates.

Enjoy.

P.S. A warning. We have to be very careful when interpreting price patterns. The way the human brain is wired we have a strong tendency to see patterns and order in just about any data set. This is particularly true in the complex world of financial markets. As traders and analysts we have to be mindful of pareidolia or seeing faces in clouds.

Weekly Market Analysis (Week 50)

2010-12-10T12:55:00.005+04:00

The weekly market analysis pages have been updated for trading week 50 (December 12th - December 16th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Qatar Stocks: Year-to-Date Returns

2010-12-07T23:48:00.001+04:00

With the Qatar market performing so strongly I'm taking a closer look a what stocks have been driving the market. In the last post I looked at relative strength. In this post I'm focusing on pure returns. In short, which Qatar stocks have risen the most and should have been in our portfolios this year.

The first chart below shows the year-to-date return for each Qatar stock.

Qatar Stocks: Year-To-Date Returns

Not surprisingly, a good portion of Qatar stocks have risen by 20 per cent or more so far this year. The charts below show the year-to-date price performance for the top ten returning Qatar stocks.

Excellent returns but also lots of significant drawdowns along the way for many of the above stocks. Which just goes to show, even where you end up picking a winner there's still plenty of volatility to endure in order to capture the big returns.

Enjoy.

Qatar Stocks: Relative Strength Rankings

2010-12-07T08:59:00.002+04:00

Qatar is where it's all happening at the moment so I thought I'd do a couple of posts looking into what stocks are leading the way in that market.

This post focuses on relative strength. The table below ranks each Qatar stock by the relative strength of its price action over three time periods: 20, 50 and 100 days.

For each stock there are three colour spectrums corresponding to each time period. When the black diamond is at the green end of the spectrum this indicates that the current price of the stock is towards the upper end of its trading range over a particular time period. When the black diamond is at the red end of the spectrum this indicates that the stock is towards the lower end of its trading range.

As you would expect from a market that has performed so strongly over the past six months there are a number of stocks that are displaying very strong relative strength over the all three time periods (the highest ranked stocks in the table below).

That said, there are also a number of stocks that are displaying quite week relative strength. So, even in a hot market such as Qatar there are still leaders and laggards.

In the next post I'll take a quick look at what stocks have performed best on a absolute basis, i.e. which Qatar stocks have risen the most so far this year.

Enjoy.

A Quick Look at the US Employment Situation

2010-12-07T08:35:00.001+04:00

Below is a chart (via Calculated Risk blog) comparing all post WWII employment recessions in the US.

The current employment recession (red line) stands out in both its severity and duration. The number of jobs lost (about -6% from the peak employment rate at the lowest point) is greater than any post WWII employment decline. And if that wasn't bad enough the current employment recession has already lasted longer than all but one other post WWII employment decline (and is on track to be longer than that one as well).

[ click to enlarge ]

And all of this is despite the truly massive amounts of money the Fed has been throwing at the US economy over the past two years (in an interview this weekend Ben Bernake said unemployment could have reached 25% withouut the US Central Bank's intervention).

The point here is that the current employment situation in the US and, for that matter, the wider economic situation doesn't conform to a typical post WWII slowdown. Beware of analysis and economic predictions that assumes we are.

Enjoy.

Qatar Market Jumps on World Cup Euphoria

2010-12-06T09:13:00.001+04:00

The QE Index finished up +3.57% on Sunday, the first trading session following the announcement of Qatar's successful 2022 World Cup bid.

However, the Index opened up nearly 7% higher and reach was almost 8% higher at one point during the trading session. So although the Index finished much higher than Thursday's close it was considerably off its intraday highs. Intraday traders most likely had a bad day yesterday.

The QE Index closed at 8,477.32, the highest closing value in more than two years.

The move up was accompanied by high volume. In fact, by my data I make it the highest volume day since early June 2009.

The QE Index is currently up over 21% for the year. That's way better than any other GCC equity market. The question now, of course, is what next?

Enjoy.

GCC Indices: Year-to-Date Performances

2010-12-05T09:00:00.001+04:00

As the chart below shows, the Qatar market is way out front with just one month of the year remaining. With a current year-to-date return of 17% the QE Index is outperforming the other GCC markets by some margin.

Now that Qatar has won the bid to host the 2022 World Cup it will be interesting to see how that market finishes the year.

After its recent surge the Dubai market fell back during November and will have to put in a strong performance in December to having any chance of achieving a positive return for 2010. For the other markets it will be a photo finish to see who finishes in the black or red this year.

Enjoy.

December Seasonality

2010-12-04T23:14:00.001+04:00

October and November, historically the weakest two months of the year for GCC equity markets, are now behind us. October managed to buck the seasonal headwinds with all markets apart from Saudi rising in value. November, however, conformed to historical tendencies with most markets falling in value.

Going into December there doesn't appear to be any prominent seasonal tendencies. Apart from the Qatar market that is. As can be seen in the chart below, the average daily change for the QE Index in December is nearly 0.40%. That's the largest historical average daily return of any market for any month.

[ Click to enlarge ]

In fact, as the chart below shows, if you had only invested in the Qatar market during the month of December from 2004 to 2009 and sat out the other eleven months of the year, you would have made a cumulative return of 47%. That's pretty good given that a buy and hold strategy would have returned just 29% over the same time period.

So, the historical tendency for the Qatar market to rise in value during December has been pretty strong. However, a word of caution. We're dealing with a very small data sample when it comes to testing seasonality (my data goes back to the beginning of 2004). So, these results should be taken with more than a pinch of salt.

That said, with the Qatar market displaying such strong performance over the last six months, plus the recent 2022 World Cup announcement, it'll be interesting to see if the bullish December tendencies materialise this year.

Enjoy.

November Large Cap Monitor

2010-12-04T15:44:00.000+04:00

The big large cap winners in November were Industries Qatar (+10.61%), Taqa (+7.80%) and Bank Muscat (+6.90%).

The biggest fallers were both in the Dubai market with DFM losing 12.64% and Dubai Islamic Bank declining by 8.33%.

Enjoy.

November GCC Index Review

2010-12-04T13:47:00.000+04:00

Historically, November has been a poor month for GCC equity markets and this year was no different. Five of the seven GCC indices fell during November with Dubai and Abu Dhabi posting the biggest losses. The Muscat 30 Index managed to eek out a small gain for the month but the only significant gainer was the QE Index, rising 4.44%.

The Qatar market has been the stand out performer in 2010 with the QE Index now up 17% for the year. With Thursday's announcement that Qatar will host the 2022 World Cup it will be interesting to see how that market finishes 2010. Will it rally into the year end on the back of this news? Or is it a a case of "buy the rumour, sell the news" for the Qatar market?

Volume across the GCC markets in November was generally lower than in October. However, the low volume can be attributed to the Eid holiday which kept markets closed for a week during the middle of November.

Enjoy.

[ Click to enlarge ]

Weekly Market Analysis (Week 49)

2010-12-04T11:11:00.001+04:00

The weekly market analysis pages have been updated for trading week 49 (December 5th - December 9th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Weekly Market Analysis (Week 48)

2010-11-28T08:59:00.003+04:00

The weekly market analysis pages have been updated for trading week 48 (November 27th - December 2nd). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Weekly Market Winners & Losers

2010-11-13T14:43:00.001+04:00

The GCC markets continue to display mixed performance again last week. Qatar and Saudi maintained their winning streaks with the QE Index rising 2.16% and the Tadawul Index rising 1.57%. Other risers were the Muscat 30 Index (+1.60%) and the ADX Index (+0.28%).

The DFM General Index was once again a big faller last week, declining -2.65%.

Weekly Price Performance

The Qatar and Saudi markets were also the biggest volume gainers last week.

Weekly Volume Performance

(versus previous week's volume)

Enjoy.

Weekly Market Analysis (Week 47)

2010-11-13T14:29:00.000+04:00

The weekly market analysis pages have been updated for trading week 47 (November 12th - November 17th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Weekly Market Winners & Losers

2010-11-06T12:19:00.004+04:00

A mixed performance for the GCC markets this week. Qatar (+1.26%), Kuwait (+0.81%), Saudi (+0.54%) and Bahrain (+0.20%) all rose over the week. However, the ADX Index (-2.35%), the DFM General Index (-2.22%) and the Muscat 30 Index (-1.01%) all fell.

Weekly Price Performance

Dubai's 2% fall occurred on much higher volume compared to the previous week. The only other markets with rising volume this week were Kuwait and Saudi.

Weekly Volume Performance

(versus previous week's volume)

Enjoy.

Weekly Market Analysis (Week 46)

2010-11-06T12:03:00.000+04:00

The weekly market analysis pages have been updated for trading week 46 (November 6th - November 11th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

A bit more of a mixed bag on the outlook front this week compared to recent weeks. The outlook for the Kuwait market continues to be bullish across the board. On the other hand the Muscat market has moved from bullish to bearish this week as has Dubai.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

November Seasonality

2010-11-03T09:02:00.000+04:00

In last month's seasonality post I noted that October and November had historically been the weakest performing months of the year for GCC equity markets. Well, the markets managed to overcome those negative tendencies in October with all GCC indices apart from Saudi rising in value over the month.

Now we head into November, historically the weakest month of the year (see chart below). Will the markets manage to overcome the odds again and continue their recent strong performance? Well, November hasn't started off that great but there's still a long way to go.

Enjoy.

GCC Indices: YTD Performances

2010-11-03T08:38:00.000+04:00

The chart below shows the year-to-date percentage returns for each GCC Index (as of October 31st). Apart from the DFM General Index all other markets are now positive for the year. Qatar is clearly the stand out performer, rising 12% so far this year and significantly outperforming the other indices.

Despite being the best performer over the last couple of months the DFM General Index is still the weakest performer year-to-date. At -2.16% it is also the only GCC index that is still down for the year.

The remaining indices have managed to eek out small positive gains. However, with two months still remaining it's difficult to predict whether 2010 will be a positive or negative year for the regional markets. Watch this space.

Enjoy.

October Large Cap Monitor

2010-11-02T09:55:00.000+04:00

The big large cap winner this month was Du which increased by an impressive 18.60% in October. The UAE banking sector was also strong with Emirates NBD rising by 15.33% and First Gulf Bank finishing 13.38% higher.

Notable fallers in October were National Bank of Kuwait which lost 9.33% and Saudi Electricity which declined by 6.51%.

Enjoy.

October GCC Index Review

2010-11-02T08:58:00.002+04:00

Following on from September's strong performance, October was another good month for GCC equity markets. Apart from the Saudi Tadawul Index which lost -0.60% over the month, all other markets ended higher in October.

The Abu Dhabi and Dubai markets led the way again with the ADX Index rising 5.35% and the DFM General Index rising 4.80%.

Volume was also strong in October with all markets except Bahrain seeing increased activity compared with the previous month.

Enjoy.

[ Click to enlarge ]

Weekly Market Winners & Losers

2010-10-31T10:54:00.000+04:00

Another good week for GCC equity markets with six of the seven regional indices moving higher. The DFM General Index moves back into pole position with a +1.90% increase over the week.

Kuwait, Saudi and the QE Index also rose by 1% or more this week with Bahrain the only index to fall in value.

Weekly Price Performance

The Muscat market was the biggest volume gainer last week, increasing by 117% from the previous week.

Weekly Volume Performance

(versus previous week's volume)

Enjoy.

Weekly Market Analysis (Week 45)

2010-10-31T10:36:00.001+04:00

The weekly market analysis pages have been updated for trading week 45 (October 30th - November 4th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

Following the bearish indications last week the Dubai market moves back to a full-on bullish outlook this week. Meanwhile, Abu Dhabi maintains its across the board bullish outlook.

Saudi is still the weakest of the GCC markets but its outlook is much improved from last week.

Visit the links above to view the full analysis reports for all GCC markets.

Enjoy.

Weekly Market Winners & Losers

2010-10-23T15:46:00.000+04:00

The Abu Dhabi Index continued its impressive recent form with a +1.77% rise this week. The biggest fallers were the QE Index (-1.19%) and the Saudi Tadawul Index (-1.15%).

Weekly Price Performance

On the volume front, the QE Index had the biggest volume gain compared to the previous week, increasing by 34%. Most other indices saw volume decreases last week with the DFM General Index volume falling by 54%.

Weekly Volume Performance

(versus previous week's volume)

Enjoy.

Weekly Market Analysis (Week 44)

2010-10-23T15:01:00.001+04:00

The weekly market analysis pages have been updated for trading week 44 (October 23rd - October 28th). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study.

The outlook for the Dubai market moves bearish this week after several weeks of positive price movement. However, the Abu Dhabi market remains bullish across all studies, as does the Muscat market.

After last week's 1.15% fall the outlook for Saudi stock market remains on the bearish side.

Visit the links above to view the full anaysis reports for all GCC markets.

Enjoy.

What's On My Financial Radar

2010-10-19T08:41:00.000+04:00

GCC Market Analytics is primarily focused on Gulf equity markets. Occasionally, however, it's a good idea to take a broader look at what's happening in the world. Below are some of the things that have appeared on my financial radar over the past week or so.

1.) Foreclosure Mess in the US

You know something's serious when a new term is coined to refer to it: Fraudclosure. The emerging mortgage foreclosure debacle in the U.S. has the potential to get very bad, very quickly. If you're not yet familiar with this subject I suggest you read this primer.

If there is a significant slowdown in the foreclosure process (Bank of America has already halted foreclosures in all fifty states) then that's bad news for the housing market, bank revenues and potentially their bottom lines.

However, it gets worse. Other issues connected to the foreclosure problem are also emerging. For example, check out this Felix Salmon article. Should anything close to this come about 2011 could see these part two of the subprime crisis.

2.) QE2

Ben Bernake looks set to crank up his money printing machine again. The big question, however, is how much money will be printed. This article makes the case that consensus market expectations on the size of QE2 may be far higher that what the Fed is actually planning.

If consensus expectations are currently being priced into the markets and the Fed action falls short of them then QE2 may not be the big party that everyone is hoping for.

3.) Sliding US Dollar

Down 13% since the June high, it looks like the prospect of QE2 is being priced into the US Dollar as well. However, should QE2 not meet expectations this fall may prove to be overdone, at least in the short-term.

There's a lot ot talk about competitive devaluation and the possibility of a currency war (see here for example). A sliding dollar may beneficial to the US but it's at the expense of someone else's share of world trade.

4.) China now in a bull market (again)

Better news for China equities. After falling 30% following the market top in July 2009 the Shanghai Composite Index has now rebounded by 25%. That's bull market territory.

Enjoy.

Weekly Market Winners & Losers

2010-10-16T17:35:00.001+04:00

Most GCC markets continued their recent price rises last week. The stand out performers were Abu Dhabi (+2.73%) and Dubai (+1.40%). Saudi was the only market to decline last week, falling -1.79%.

Weekly Price Performance

The biggest volume gainers compared to the previous week were Abu Dhabi (+280%) and Muscat +259%). The biggest volume fallers were the Qatar (-44%) and Bahrain (-26%) markets.

Weekly Volume Performance

(versus previous week's volume)

Enjoy.

Weekly Market Analysis (Week 43)

2010-10-16T16:24:00.001+04:00

The weekly market analysis pages have been updated for trading week 43 (October 16th - October 22nd). Use the links below to view the individual market analysis pages:

Dubai - Abu Dhabi - Saudi - Kuwait - Qatar - Bahrain - Muscat

The table below shows the market outlook based on each study. The market with the most bullish outlook this coming week is Muscat where all studies are indicating higher prices.

Saudi, on the other hand, has the weakest market outlook with all studies suggesting lower levels this week.

Visit the links above to view the full anaysis reports for all GCC markets.

Enjoy.

Announcement: Changes to GCC Market Analytics

2010-10-11T14:41:00.001+04:00

This is a brief post to notify readers about a couple of recent changes to the GCC Market Analytics website.

Firstly, a number of readers have contacted me regarding the lack of information on the "About" page. It's been on my to-do list for some time but I've finally got around to completing it. For people that like to know such things the "About" page now has my contact details and a link to my Linked In profile page where you can find more information about me.

Secondly, and more significantly, I've made some changes to the way the various weekly analysis reports are distributed. At present there are four studies that I update and post on a weekly basis: Trend Analysis, Index Analysis, Market Breadth and Pattern Match Price Projections. Having individual posts for each study was fine initially but I think now's the time to change things slightly in order to ensure a better and more useful experience for readers.

So, rather than have individual posts for each study type I've decided to aggregate the weekly studies by market. Recent visitors to the website may have already noticed the new options on the menu bar at the top of each page.

Each GCC market now has its own page. Each page contains the weekly studies that relate specifically to that market. For example the "Dubai" page contains the Trend Analysis, Index Analysis, Market Breadth Analysis and Pattern Match Price Projection studies relating to the DFM General Index.

Every week I'll update the studies for each market. In addition to this I'll provide an overview post which will highlight the the market outlook for each study.

Structuring the website in this manner will hopefully make it easier for me to update on a weekly basis and for readers to understand and make use of.

Future Plans

Whilst the GCC Market Analytics website has been getting up and running I've mainly focused on market level analysis and studies. Soon, however, I hope to provide stock level analysis. Knowing what the overall market is likely to do is a distinct advantage but it's the decisions made at stock level that greatly determine success or failure. Look out for some stock level analysis and trading strategies in the coming weeks.

Anyway, that's all for now. As always, any comments or suggestions are always welcome.

Enjoy.

Weekly GCC Trend Analysis (Week 42)

2010-10-10T07:33:00.002+04:00

The DFM General Index moves back to a Bullish outlook this week and Saudi moves from Bearish to Neutral.

All other indices have a Very Bullish outlook, particularly Kuwait, Qatar, Bahrain and Muscat where the all three trend lengths are rising.

Enjoy.

[ Click to enlarge ]

Notes:
1. In the "Current Trend Conditions" section the short-term, medium-term and long-term trend values are determined by dual moving averages. The trend value is "Up" when the the shorter length moving average is greater the longer length moving average. The trend value is "Down" when the the shorter length moving average is less then the longer length moving average. For more information on dual moving averages see previous post here.
2. Dual moving average parameters are specific to each index and time-frame (short, medium and long)

3. The "Outlook" value can be "Very Bullish," "Bullish," "Neutral," "Bearish" or "Very Bearish." The value is determined by the historical performance of the index when the same short, medium and long-term trend conditions were in evidence in the past.

4. The top chart shows a plot of the historical price performance of the index. Highlighted on the chart are the past periods when the current trend conditions were in evidence in the past

5. The bottom chart shows the non-compounded percentage returns of the index when the current trend condition were in evidence in the past.

October Seasonality: Market Headwinds

2010-10-04T14:12:00.001+04:00

After the across the board market gains in September what can we look forward to in October? Well, based on hisrotical market performance the next couple of months have tended to be the weakest of the year.

The chart below shows the average daily perentage change for each GCC market during each calendar month. As you can see, October and November are the worst performing months of the year.

After September's strong gains it will be interesting to see if the markets can overcome this seasonal tendency.

Enjoy.

Enjoy.

Weekly Market Breadth Analysis (Week 41)

2010-10-04T12:14:00.000+04:00

Both the Saudi and Kuwait markets slipped into negative breadth territory at the end of last week. The other GCC markets maintain their positive breadth and bullish outlook.

To find out how each individual GCC market has performed during periods of positive and negative market breadth please refer to this previous post.

Enjoy.

Dubai Market Plays Catch-Up in September

2010-10-04T11:31:00.000+04:00

As briefly mentioned in the Monthly Index Review post, the DFM General Index was by far the best performer in September. However, as shown in the chart below, September was very much a case of Dubai playing catch-up with the other GCC indices.

Dubai's still the worst performing GCC index this year but at least the +13.48% rise in September brought it back into the pack, so to speak.

Qatar is the best performer so far this year, gaining +10.57%. That's below it's highest point this year, though, which was set back in mid April when the Index was up +12.10%.

Enjoy.

September GCC Index Review

2010-10-04T07:36:00.001+04:00

All GCC indices rose in value during September. However, the DFM General Index was the stand out performer, rising 13.48% over the month.

This was probably a case of the DFM General Index playing catch up with the other GCC indices. Going into September the Index was down 18% for the year, almost twice as much as the next worst performing index. Dubai is still the worst performing Index so far this year but is now down only 6.65%.

On the volume front the Dubai market was also the leader in September with a +175% increase in shares traded compared to the previous month. However, in absolute terms the volume in Dubai during September was not significant. In fact, the monthly volume was only the fifth highest month so far this year.

Enjoy.

[ Click to enlarge ]

September Large Cap Monitor

2010-10-03T13:42:00.001+04:00

September was a good month for GCC markets with 33 of the 35 large capitalisation stocks monitored rising in value during September.

The best large cap performers were Abu Dhabi Commercial Bank (+37%) and Kuwait's Gulf Insurance (+32%). The only large cap decliner in September was Bahrain's Albaraka Banking Group (-0.67%)

Enjoy.

Weekly GCC Index Analysis (Week 41)

2010-10-03T11:32:00.000+04:00

All GCC indices are now trading above their 20-day, 50-day and 100-day moving averages confirming the positive price moves seen over the past couple of weeks.

Currently, the Kuwait Index is showing particular strength. Historically, when the Index has been in a similar position, the following 5 day change has been positive over 80% of the time with an average gain of 1.82%.

The outlook for all other indices is positive with the exception of the ADX Index and the Bahrain Index which are neutral.

Enjoy.

Weekly GCC Trend Analysis (Week 41)

2010-10-03T10:23:00.004+04:00

The DFM General Index moves back to a Neutral outlook this week whilst the ADX Index continues to be Very Bullish.

The Saudi Tadawul Index slips to Bearish from Neutral and the trend conditions in both the Kuwait and Bahrain markets have moved into their most bullish phases.

The outlook for the QE Index and Muscat 30 Index continues to be Very Bullish.

Enjoy.

[ Click to enlarge ]

4. The top chart shows a plot of the historical price performance of the index. Highlighted on the chart are the past periods when the current trend conditions were in evidence in the past

5. The bottom chart shows the non-compounded percentage returns of the index when the current trend condition were in evidence in the past.

Price Projections Using Pattern Matching (Week 40)

2010-09-26T17:27:00.000+04:00

Below are this week's index price projections based on the pattern matching approach presented in this previous post.

Here's a summary table which provides a 5-day outlook based on the price projections for each GCC index:

The price projections on the charts below extend for twenty trading days into the future. However, in the table above we're only looking at what the price projections are telling us about the next five days.

For each index there are three 5-day price projections based on the three best historical price matches. For example, the best historical match for the DFM General Index was higher five trading days later (Best Match 1 = "Up"), as was the second best match. However, the thrid best match was lower five trading days later (Best Match 3 = "Down").

The "5-Day Outlook" column provides the average 5-day price change of the three best historical matches. For the DFM General Index the average 5-day outlook is 0.65%.

As you can see, the price projection based outlooks broadly confirm what we're seeing in the other weekly analysis reports (Trend Analysis, Index Analysis & Market Breadth). That is, most projections are pointing to higher index levels this week.

Enjoy.

Weekly Market Breadth Analysis (Week 40)

2010-09-26T12:54:00.000+04:00

Good news. All GCC markets are now displaying positive market breadth. Historically, this has provided a bullish outlook for the GCC markets.

To find out exactly how bullish each individual GCC market has performed during positive market breadth periods please see this previous post.

Enjoy.

Weekly GCC Index Analysis (Week 40)

2010-09-25T14:07:00.000+04:00

The only notable change from last week's Index Analysis is that the outlook for the Muscat 30 Index has now turned Bullish. The outlook for all other GCC indices remains the same which is good news because apart from the ADX Index all have a Bullish outlook.

Enjoy.

Weekly GCC Trend Analysis (Week 40)

2010-09-24T19:58:00.000+04:00

No changes in the trend conditions from last week. Most markets remain in either a Bullish or Very Bullish state.

Enjoy.

[ Click to enlarge ]

4. The top chart shows a plot of the historical price performance of the index. Highlighted on the chart are the past periods when the current trend conditions were in evidence in the past

5. The bottom chart shows the non-compounded percentage returns of the index when the current trend condition were in evidence in the past.

Weekly Market Breadth Analysis (Week 39)

2010-09-20T14:11:00.001+04:00

The market breadth analysis remains the same as last week. All GCC markets except for Bahrain are currently experiencing positive market breadth and, therefore, have a bullish market outlook. Bahrain's market breadth breadth remains negative, but less so than last week.

Enjoy.

DFM General Index: 9 Higher Closes in the Last 10 Trading Sessions

2010-09-20T12:21:00.002+04:00

Monday's DFM General Index close was the ninth higher close out of the last ten trading sessions. The chart below shows the previous 138 occurrences of nine out of ten higher closes.

As you can see, most of the previous occurrences were in 2004 and 2005. Recently, however, there have been fewer and fewer instances.

Historically, the DFM General Index has closed higher five trading sessions later 64% of the time following days when nine of the last ten trading sessions yielded nine higher closes. The average gain was 0.70%.

When the market did closer higher five days later it do so by an average of 1.76%. When is closed lower it lost an average of -1.22%.

In conclusion, when the DFM General Index has closed higher for nine of the last ten trading sessions this has been broadly positive for the market over the next five trading sessions. It certainly hasn't foreshadowed any significant market sell-off in the week following such occurrences.

Enjoy

Weekly GCC Index Analysis (Week 39)

2010-09-19T10:40:00.001+04:00

No notable changes from last week. Aside from the Muscat 30 Index all other indices are now trading above their 20, 50 and 100-day moving averages.

Enjoy.

Weekly GCC Trend Analysis (Week 39)

2010-09-18T19:44:00.004+04:00

In a shortened holiday trading week for the GCC markets the only changes to last week's trend outlook is the move from Neutral to Very Bullish for both the ADX Index and the Muscat 30 Index. The outlook for all other indices remains the same.

Enjoy.

4. The top chart shows a plot of the historical price performance of the index. Highlighted on the chart are the past periods when the current trend conditions were in evidence in the past

5. The bottom chart shows the non-compounded percentage returns of the index when the current trend condition were in evidence in the past.

More Price Projections Using Pattern Matching

2010-09-18T11:19:00.001+04:00

In the last post I described a method of formulating price projections based on a pattern matching approach applied to the DFM General Index. Below are the price projections for the other GCC indices.

As a reminder, the pattern matching approach can be summarised as follows (for a more detailed explanation see the previous post here):

Compare the current 25 day index price movement against all previous 25 day price movements
Select the three matches that correlate most closely with the current 25 day price movement
Note the subsequent 20 day price movements for each of the three best matches
Project the current price 20 days into the future based on subsequent price movements of the three best matches

In the charts below the light blue line is the current 25 day index price movement. The red, green and orange lines are price projections based on three best historical matches. The red, green and orange markers in the smaller inset chart highlight the three best historical match periods on the respective index.

Enjoy.

Highest Relative Strength UAE Stocks

2010-09-17T12:10:00.002+04:00

It has been a good start to September for stock holders in the UAE with the Dubai market advancing 11% and the Abu Dhabi market 4.3%.

Below are two tables showing the top ranked Dubai and Abu Dhabi stock by relative strength. For information on how to interpret these tables please refer to this previous post.

In Dubai it's Aramex and DFM that have best combined relative strength across the 20, 50 and 100 day time frames. In Abu Dhabi, ADCB, Dana Gas, RAK White Cement and United Arab Bank are all at the top of their 20, 50 and 100 day trading ranges.

Also provided below are the complete relative strength rankings for all UAE stocks.

[ Click to enlarge ]

Enjoy.

Price Projections Using Pattern Matching

2010-09-16T07:00:00.003+04:00

When analysing markets and trying to predict future price action there are certain techniques and studies that I pay a lot of attention to (here and here for example). There are other studies, however, that I don't assign any great weight to but still look at regularly because they're, you know, fun and interesting. The pattern matching and price projection study I'll describe in this post falls into this category.

Here's how it works. Let's take the cumulative percentage return of the DFM General Index over the previous 25 trading days:

This 25 day price action can compared with all other historical 25 day periods for the DFM General Index. In doing so we can identify which past 25 day price periods most closely match the current 25 day price action (note: the matching algorithm I used has been adapted from the gummy-stuff.org website. It uses a Pearson correlation to determine the level of similarity between the current 25 day cumulative returns and the historical 25 day cumulative returns).

As an example, the chart below shows the current 25 day price return (dark blue line) versus the best historical 25 day match (light blue line):

As you can see, the cumulative 25 day return of the best historical match closely tracks the the current 25 day price returns. The smaller chart shows at what point the best historical match occurred on the DFM General Index. In this example the the 25 day period that most closely matched the current 25 day price movement was in September 2007.

Next, we can use the price action that followed the best historical match to make a price projection for the current market. The chart below shows three such price projections:

Rather than rely on the price projection of the single best historical match I've also included the second and third best matches. Each projection extends for 20 trading days into the future and is determined by the price action that followed the corresponding best match period.

For example, the dotted red line shows the 20 day projected price action, from the current market level, based on the price action that followed the best historical match back in October 2007. The dotted green line is another 20 day projection but based on the second best historical match (Jan 2005) and the orange line is the projection based on the third best historical match (Aug 2004).

The red, green and orange markers on the smaller chart highlight the three best historical match periods on the DFM General Index.

In the example above we can see that the price action that followed both the best historical match (dotted red line) and second best historical match (dotted green line) was bullish, extremely so for the best match. However, the price action that followed the third best match (dotted orange line) was bearish.

The rationale underlying this analysis is that periods of similar price action will also share similar future price action. Of course, the future is unlikely to unfold exactly as it did in the past. Nonetheless, it's informative to know how similar price movements to the one forming currently played out in the past.

In the next post I'll provide the price projections for other GCC indices based on this pattern matching analysis.

Let me know what you think.

Enjoy.

Weekly Market Breadth Analysis (Week 38)

2010-09-13T12:21:00.000+04:00

Apart from Bahrain, all GCC markets are displaying positive market breadth this week. To understand what this might mean for future price action please see here and here.

For an explanation of how to interpret the charts below please see here.

Enjoy.

Dubai. The Week Ahead.

2010-09-12T22:44:00.002+04:00

So, we have our post hoc explanation for last week's market rise in Dubai: Dubai World Debt Plan Wins Support.

Is this good or bad news for the market? I don't know and, to be honest, I'm not a big fan of trying to interpret how large groups of people will react to news stories such as these.

If the market zooms up next week we'll be told that the debt plan agreement has restored confidence in Dubai. Should the market do very little next week this will be because the news of the debt plan agreement had already been "priced in." And if there is any sizable fall in the market that will be due to "profit taking."

By the end of next week the appropriate explanation will be obvious. Retrodicting is easy. Prediction is a little harder.

So, whilst acknowledging the potential importance of the Dubai debt plan agreement I'm going to revert to my regular analysis approach: determine the current state of the market and analyse what has happened in the past under similar conditions.

With this in mind, below are a couple of interesting things I noticed about the Dubai market last week and what they might mean for the upcoming trading week.

1. Volume

On an absolute basis the volume increase that accompanied last week's market rise was nothing spectacular. Below is a chart of the volume for the DFM General Index. As you can see, the recent volume has so far not even matched the volume levels seen previously this year in June/July.

However, looking at absolute volume levels doesn't take into consideration the overall volume environment of the market. A daily volume increase of one million shares can be significant in a low volume environment but but less so in a high volume environment. Normalising the volume data makes it easier to compare relative volume changes over time. Below is a chart showing the normalsed volume for the DFM General Index going back to the beginning of 2006.

There are many ways to normalize volume data but I've chosen a simple method that calculates how far current volume levels are from their 20-day average. For example, on Monday last week the volume in Dubai was over two hundred million shares which was about 270% greater than the average over the previous 20 days.

As you can see, the level of normalised volume seen last week (highlighted on the chart above) is fairly rare and has only been exceeded twice since the beginning of 2006.

So, in absolute terms the current volume levels aren't very significant. However, when we take into account the current low volume environment of the Dubai market the actual volume increases seen last week were very unusual. The question is does this tell us anything useful regarding future price action.

Below is the performance of the DFM General Index during and after high normalised volume periods. The red line is the performance of the DFM General Index for the five days following a daily volume level which is 150% greater than the average volume of the last 20-days. The green line is the same but for volume levels that are 200% greater than the average volume of the last 20-days.

From the chart above, it looks like the five days following high normalised volume days have tended to be bullish for the Dubai market. When volume has been greater than 150% of the 20-day average the market has been higher five days later 75% of the time (21 out of 28 instances) for an average gain of 6.55%. When volume has been greater than 200% of the 20-day average the market has been higher five days later 83% of the time (15 out of 18 instances) for an average gain of 5.83%.

Whilst the sample size isn't massive there is a definite tendency for a sizable market increase in the week following high normalised volume periods.

2. Price Activity

I noticed on Monday that the Dubai market had closed on it's high for the second day running. Exactly on its high, that is. I looked to see how often this had happened in the past. The answer? Never.

Then on Tuesday the same thing. Another close on the high. Three days is a row.

What to make of this? An oddity to be ignored? A manifestation of the strength of the market and an indication of further strength to come? Or a sign of "irrational exuberance" and that the market has gone too far too quickly?

Because there are no prior instances of the market closing on it's high three days in a row (or even two days in a row) I decided to test what had happened when the market had closed very near its high. The chart below shows the five day performance of the DFM General Index when it closed in the top 90% of it's daily trading range for two days in a row (blue line) and three days in a row (red line).

When the Index closed in the top 90% of it's daily trading range for two days in a row the following five day performance was positive 78% of the time (25 out of 32 instances) with an average gain of 4.90%. In the 22% of instances where the Index didn't close higher five trading days later the average loss was -2.97%.

For three days in a row the following five day performance was positive 98% of the time (11 out of 12 instances) with an average gain of 3.34%. The only instance where the Index didn't close higher five trading days later resulted in a loss of -0.66%.

So, the fact that the market has closed at its highs three days in a row has historically been a sign of strength and that higher levels are to come, for the next five trading days at least.

Conclusion

So, two studies pointing to higher levels for the Dubai market this week. Did I miss all the studies that point to a market crash this week? Probably.

Enjoy.

Weekly GCC Index Analysis (Week 38)

2010-09-12T15:43:00.001+04:00

All market indices are now trading above their respective 20-day and 50-day moving averages. That's means the 5 day outlook for most markets is now bullish.

Enjoy.

Weekly GCC Trend Analysis (Week 38)

2010-09-12T12:38:00.001+04:00

In a shortened three day trading week the DFM General Index still managed to rise an impressive +6%. This was enough to turn both the short-term and medium-term trends positive and for the overall outlook to turn from Very Bearish last week to Bullish this week.

The same trend changes occurred for the ADX Index but the outlook has only changed to Neutral from Very Bearish. No change in the outlook from last week for the other GCC indices: Saudi = Neutral, Kuwait = Very Bullish, Qatar = Very Bullish, Bahrain = Bullish, Oman = Neutral.

Enjoy.

[ Click to enlarge ]

4. The top chart shows a plot of the historical price performance of the index. Highlighted on the chart are the past periods when the current trend conditions were in evidence in the past

5. The bottom chart shows the non-compounded percentage returns of the index when the current trend condition were in evidence in the past.

Saudi Stocks: Relative Strength

2010-09-09T23:23:00.001+04:00

Most of the analysis I've posted so far has concentrated on the market or index level. Knowing what the broad market is doing is important but I also want to provide sector and stock level analysis as well. Now that I have my historical share price database in working order I can start doing this.

In this post I'm going look at Saudi stocks and introduce a simple relative strength study that can be used to quickly evaluate the how strong or weak recent price action has been for a particular stock. It can also be used to compare the relative strength/weakness between stocks.

The study compares the current price of a stock to the previous 20, 50 and 100 days price action. Specifically, the current price is ranked between 0 and 100 according to the 20, 50 and 100 day price ranges. For example, if the current price of a stock was $47 and this was the highest price for that stock over the last 20 trading days the resulting ranking value would be 100. However, if $47 represented the lowest price over the last 20 trading days the ranking would be 0. A ranking value of 50 would signify that the current stock price was in the middle of the price range over the last 20 trading days.

The chart below shows the last 100 trading days for Saudi Hollandi Bank. The three yellow triangles mark the stock price 20, 50 and 100 trading days ago. The red circle highlights the current price of the stock. The 50 day price range is also show on the chart.

As can be seen, the current price is the highest price during the last 50 trading days. The same goes for the current price versus the 100 and 20 day price ranges. Is this example the ranking of the current versus all three historical price ranges would be 100.

And below is how the same information is presented in the relative strength study:

The three red-to-green spectrum bars correspond to the three time periods; 20, 50 and 100 days. The dark blue diamonds mark the ranking of the current price versus the historical ranges. For Saudi Hollandi Bank all three diamonds are positioned to the far right indicating that the current price is in the highest portion of the historical ranges.

This is a stock that has clearly demonstrated significant price strength over the past 20, 50 and 100 trading days. This strength is captured in the "Rank" column above. The highest ranked stocks are those that have achieved the highest combined relative strength across the three trading ranges compared to other Saudi stocks. That Saudi Hollandi Bank has a ranking of 1 tells us it is currently the strongest performing Saudi stock.

Here's another example for The National Shipping Company:

In this case the diamond is in the middle of the bar for the 20 day price range indicating that the current price is in the middle of that range. For the 50 and 100 day ranges the diamonds are positioned towards the left end of the bar indicating that the current price is in the lower portions of those ranges.

The National Shipping Company has a ranking of 98. Given that there are about 150 Saudi stocks (in my database, that is) this ranking suggests that The National Shipping Company is one of the weaker performing stocks.

So, this study shows the relative strength of a stock (how the current price of a stock compares to its historical price action) and how that relative strength compares to other stocks. At the end of this post is a complete list of relative strength data for all Saudi stocks. Below, however, are the ten current highest and lowest ranked relative strength Saudi stocks:

Of course, knowing the stocks with the highest and lowest relative strength is one thing but how do we use this information? Do the highest ranked stocks continue to perform strongly? Or is it best to buy the weakest stocks in anticipation of a rebound? In future posts I'm going to cover stock rotation strategies which will be aimed at answering these types of questions.

That's all for now though.

Enjoy.

[ Click to enlarge ]

Market Breadth: Part III

2010-09-07T16:17:00.001+04:00

In Part I and Part II of the series on market breadth I introduced the advance/decline indicator and showed how it could be applied to GCC markets to identify upcoming bullish and bearish price action.

In this post I want to introduce a new study based on the advance/decline indicator which I'll update on a weekly basis. Here's an example of the study for the Kuwait market:

The chart shows the last 100 days activity for the advance/decline indicator and corresponding market index. The solid green and red areas are the 10-day advance/decline indicator. Where the indicator is above the zero level (green area) a higher number of stocks are rising in price than falling. Where the indicator is below the zero level (red area) a higher number of stocks are falling in price than rising.

The dotted line highlights the current advance/decline indicator level which in the chart above is about -5%. Also overlayed on the chart (dark shaded line) is the last 100 days price activity for the market index, in this case the Kuwait Index. There is no price axis for the market index but I have highlighted the most recent closing value.

The last post showed that when the 10-day advance/decline indicator was positive this had a strong historical tendency to correspond with a rising market. On the other hand, when the indicator was negative this tended to correspond with a falling market. For the Kuwait market you can see the advance/decline indicator is currently negative (as of market close 5th Sept.) which, historically, has tended to be bearish for future market price activity.

Over the coming holiday weekend I'll post up-to-date advance/decline studies for all GCC markets.

Enjoy.